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Question 1 of 10
1. Question
Which of the following statements is true regarding TIC accounts?
I. Accounts registered as tenants in common provide fractional ownership for each of the joint owner
II. When one owner deceases, his or her share in the account passes to the surviving owner
III. The division of ownership of TIC accounts does not have to be equal, but should be stated at the time that the account is established
IV. The deceased’s share of the account will be distributed according to his or her willCorrect
TIC accounts
Accounts registered as tenants in common provide fractional ownership for each of the joint owners. When one owner deceases, his or her share in the account does not pass to the surviving owner as with accounts registered as joint tenants with rights of survivorship. The decedent’s share of the account will instead pass to the estate. The division of ownership of TIC accounts does not have to be equal, but should be stated at the time that the account is
established. The deceased’s share of the account will be distributed according to his or her will. In the event that either of the account owners die or are declared incompetent by a legal court, all transactions and orders that are not complete must be canceled.Incorrect
TIC accounts
Accounts registered as tenants in common provide fractional ownership for each of the joint owners. When one owner deceases, his or her share in the account does not pass to the surviving owner as with accounts registered as joint tenants with rights of survivorship. The decedent’s share of the account will instead pass to the estate. The division of ownership of TIC accounts does not have to be equal, but should be stated at the time that the account is
established. The deceased’s share of the account will be distributed according to his or her will. In the event that either of the account owners die or are declared incompetent by a legal court, all transactions and orders that are not complete must be canceled. -
Question 2 of 10
2. Question
Which of the following statements is true regarding TOD accounts?
I. A registration of transfer-on-death stipulates that a deceased’s account be transferred upon his or her death to the person listed as the beneficiary on the account
II. While the owner of the account is alive, he or she retains half ownership rights to the account, with the inability to change the beneficiary at any time
III. Transfer-on-death accounts are often regarded as the easiest way to keep investment accounts out of probate courts
IV. TOD accounts are limited to individual accounts and JTWROS accounts, and may not be designated to other types of accountsCorrect
TOD accounts
A registration of transfer-on-death stipulates that a deceased’s account be transferred upon his or her death to the person listed as the beneficiary on the account. While the owner of the account is alive, he or she retains full ownership rights to the account, with the ability to change the beneficiary at any time. Upon the passing of the account owner, all of the assets are immediately transferred to the beneficiary. TOD accounts are still subject to the estate tax, but avoid probate courts. Transfer-on-death accounts are often regarded as the easiest way to keep investment accounts out of probate courts, and are very popular with investors who do not wish to spend money to establish trusts and legal wills. TOD accounts are limited to individual accounts and JTWROS accounts, and may not be designated to other types of accounts.Incorrect
TOD accounts
A registration of transfer-on-death stipulates that a deceased’s account be transferred upon his or her death to the person listed as the beneficiary on the account. While the owner of the account is alive, he or she retains full ownership rights to the account, with the ability to change the beneficiary at any time. Upon the passing of the account owner, all of the assets are immediately transferred to the beneficiary. TOD accounts are still subject to the estate tax, but avoid probate courts. Transfer-on-death accounts are often regarded as the easiest way to keep investment accounts out of probate courts, and are very popular with investors who do not wish to spend money to establish trusts and legal wills. TOD accounts are limited to individual accounts and JTWROS accounts, and may not be designated to other types of accounts. -
Question 3 of 10
3. Question
Which of the following statements is true regarding trust and estate accounts?
I. The main difference in the accounts is that estate accounts are set up to manage a deceased person’s estate
II. Trust accounts are those accounts that are owned by a trust that is acting as a legal entity
III. Estates that are governed by estates usually avoid probate court altogether and allow more assets to be passed on by avoiding fees associated with probate court
IV. Estates accounts further simplify the process by allowing the trust to possess ownership of the investment account and name the beneficiary at account registrationCorrect
Trust and estate accounts
Trust and estate accounts are managed almost identically. The main difference in the accounts is that estate accounts are set up to manage a deceased person’s estate. Trust accounts are those accounts that are owned by a trust that is acting as a legal entity. Trusts are used by investors to simplify the transference of property to beneficiaries after the investor’s death. Estates that are governed by trusts usually avoid probate court altogether and allow more assets to be passed on by avoiding fees associated with probate court. Trust accounts further simplify the process by allowing the trust to possess ownership of the investment account and name the beneficiary at account registration. Thus, trust accounts provide multiple benefits to investors by bypassing probate (and saving fees associated therewith) and providing an easy method of transference to the beneficiary.Incorrect
Trust and estate accounts
Trust and estate accounts are managed almost identically. The main difference in the accounts is that estate accounts are set up to manage a deceased person’s estate. Trust accounts are those accounts that are owned by a trust that is acting as a legal entity. Trusts are used by investors to simplify the transference of property to beneficiaries after the investor’s death. Estates that are governed by trusts usually avoid probate court altogether and allow more assets to be passed on by avoiding fees associated with probate court. Trust accounts further simplify the process by allowing the trust to possess ownership of the investment account and name the beneficiary at account registration. Thus, trust accounts provide multiple benefits to investors by bypassing probate (and saving fees associated therewith) and providing an easy method of transference to the beneficiary. -
Question 4 of 10
4. Question
Which of the following statements is true regarding trust and estate accounts?
I. The main difference in the accounts is that estate accounts are set up to manage a deceased person’s estate
II. Trusts are used by investors to simplify the transference of property to beneficiaries after the investor’s death
III. Estates that are governed by estates usually avoid probate court altogether and prohibit more assets to be passed on by avoiding fees associated with probate court
IV. Estates accounts further simplify the process by allowing the trust to possess ownership of the investment account and name the beneficiary at account registrationCorrect
Trust and estate accounts
Trust and estate accounts are managed almost identically. The main difference in the accounts is that estate accounts are set up to manage a deceased person’s estate. Trust accounts are those accounts that are owned by a trust that is acting as a legal entity. Trusts are used by investors to simplify the transference of property to beneficiaries after the investor’s death. Estates that are governed by trusts usually avoid probate court altogether and allow more assets to be passed on by avoiding fees associated with probate court. Trust accounts further simplify the process by allowing the trust to possess ownership of the investment account and name the beneficiary at account registration. Thus, trust accounts provide multiple benefits to investors by bypassing probate (and saving fees associated therewith) and providing an easy method of transference to the beneficiary.Incorrect
Trust and estate accounts
Trust and estate accounts are managed almost identically. The main difference in the accounts is that estate accounts are set up to manage a deceased person’s estate. Trust accounts are those accounts that are owned by a trust that is acting as a legal entity. Trusts are used by investors to simplify the transference of property to beneficiaries after the investor’s death. Estates that are governed by trusts usually avoid probate court altogether and allow more assets to be passed on by avoiding fees associated with probate court. Trust accounts further simplify the process by allowing the trust to possess ownership of the investment account and name the beneficiary at account registration. Thus, trust accounts provide multiple benefits to investors by bypassing probate (and saving fees associated therewith) and providing an easy method of transference to the beneficiary. -
Question 5 of 10
5. Question
Which of the following statements is true regarding qualified domestic relations orders?
I. Qualified domestic relations orders (QDROs) concern the division of property following a marriage, specifically the division of a retirement plan
II. A QDRO is a court order based on a divorce settlement which allots a portion of the retirement or pension plan to family members
III. The most ordinary QDRO allotment is 50% of the total decrease in the retirement plan’s assets from the marriage’s inception to the point of divorce
IV. If an accountholder were simply to distribute a portion of his retirement account to his ex-spouse, the accountholder would still be liable for the taxesCorrect
Qualified domestic relations orders
Qualified domestic relations orders (QDROs) concern the division of property following a divorce, specifically the division of a retirement plan. A QDRO is a court order based on a divorce settlement which allots a portion of the retirement or pension plan to family members, ordinarily to the accountholder’s ex-spouse but sometimes also to children or dependents. The most ordinary QDRO allotment is 50% of the total increase in the retirement plan’s assets from the marriage’s inception to the point of divorce. QDROs are important because they also shift tax liability. If an accountholder were simply to distribute a portion of his retirement account to his ex-spouse, the accountholder would still be liable for the taxes, but a QDRO ensures that the ex-spouse would be liable.Incorrect
Qualified domestic relations orders
Qualified domestic relations orders (QDROs) concern the division of property following a divorce, specifically the division of a retirement plan. A QDRO is a court order based on a divorce settlement which allots a portion of the retirement or pension plan to family members, ordinarily to the accountholder’s ex-spouse but sometimes also to children or dependents. The most ordinary QDRO allotment is 50% of the total increase in the retirement plan’s assets from the marriage’s inception to the point of divorce. QDROs are important because they also shift tax liability. If an accountholder were simply to distribute a portion of his retirement account to his ex-spouse, the accountholder would still be liable for the taxes, but a QDRO ensures that the ex-spouse would be liable. -
Question 6 of 10
6. Question
Which of the following statements is true regarding partnership accounts?
I. Partnerships are businesses founded according to a relationship agreement that sets forth the reasons that the relationship was formed
II. They are relatively easy to set up and disband, but do not perform well at raising large amounts of capital
III. Partnerships are attractive to investors that are trying to manage tax liabilities
IV. The management of accounts set up for partnerships varies by the type of relation formedCorrect
Partnership accounts
Partnerships are businesses founded according to a partnership agreement that sets forth the reasons that the partnership was formed. They are relatively easy to set up and disband, but do not perform well at raising large amounts of capital. Partnerships are attractive to investors that are trying to manage tax liabilities. Income and losses pass through the partnerships to the partners, avoiding double taxation (once to the partnership, and again to the partner). The management of accounts set up for partnerships varies by the type of partnership formed.Incorrect
Partnership accounts
Partnerships are businesses founded according to a partnership agreement that sets forth the reasons that the partnership was formed. They are relatively easy to set up and disband, but do not perform well at raising large amounts of capital. Partnerships are attractive to investors that are trying to manage tax liabilities. Income and losses pass through the partnerships to the partners, avoiding double taxation (once to the partnership, and again to the partner). The management of accounts set up for partnerships varies by the type of partnership formed. -
Question 7 of 10
7. Question
Which of the following statements is true regarding limited liability company?
I. Limited liability companies are companies formed with characteristics of both corporations and partnership
II. Investors invest in limited liability companies, or LLCs, to take advantage of the tax benefits characteristic of each type of business
III. LLCs are similar to corporations in that the investors have limited liability in the investment
IV. LLCs are different from partnerships in that the profits and losses of LLCs flow through the company to the investorCorrect
Limited liability company
Limited liability companies are companies formed with characteristics of both corporations and partnerships. Investors invest in limited liability companies, or LLCs, to take advantage of the tax benefits characteristic of each type of business. LLCs are similar to corporations in that the investors have limited liability in the investment. The limit of their liability is their investment in the company, instead of the entirety of debt obligations of the company. LLCs are similar to partnerships in that the profits and losses of LLCs flow through the company to the investor. This may provide the investor with tax deductions in the case of losses, and will prevent double taxation of income that is inherent in corporate structures.Incorrect
Limited liability company
Limited liability companies are companies formed with characteristics of both corporations and partnerships. Investors invest in limited liability companies, or LLCs, to take advantage of the tax benefits characteristic of each type of business. LLCs are similar to corporations in that the investors have limited liability in the investment. The limit of their liability is their investment in the company, instead of the entirety of debt obligations of the company. LLCs are similar to partnerships in that the profits and losses of LLCs flow through the company to the investor. This may provide the investor with tax deductions in the case of losses, and will prevent double taxation of income that is inherent in corporate structures. -
Question 8 of 10
8. Question
Which of the following statements is true regarding importance of knowing clients’ financial objectives?
I. It is critical to understand clients’ objectives. Different objectives require widely varied strategies
II. A retiree seeking current income will be well served by a highly leveraged aggressive investment
III. The objectives of all clients different from the two extremes of total conservation of capital and ultra-risky investments
IV. The only proper financial strategy for a client is the strategy that is suited to his or her objectives and needsCorrect
Importance of knowing clients’ financial objectives
It is critical to understand clients’ objectives. Different objectives require widely varied strategies. A retiree seeking current income will not be well served by a highly leveraged aggressive investment. They are more suited to a fixed-income security such as bonds or preferred stock. Similarly, young investors with a long time horizon seeking capital growth will not be well served if the majority of their assets are invested in fixed-income securities, as they are relatively stable and do not provide much opportunity for growth. Such investors would be more suited to more aggressive strategies. The objectives of all clients will fall between (and occasionally touch) the two extremes of total conservation of capital and ultra-risky investments. The only proper financial strategy for a client is the strategy that is suited to his or her objectives and needs.Incorrect
Importance of knowing clients’ financial objectives
It is critical to understand clients’ objectives. Different objectives require widely varied strategies. A retiree seeking current income will not be well served by a highly leveraged aggressive investment. They are more suited to a fixed-income security such as bonds or preferred stock. Similarly, young investors with a long time horizon seeking capital growth will not be well served if the majority of their assets are invested in fixed-income securities, as they are relatively stable and do not provide much opportunity for growth. Such investors would be more suited to more aggressive strategies. The objectives of all clients will fall between (and occasionally touch) the two extremes of total conservation of capital and ultra-risky investments. The only proper financial strategy for a client is the strategy that is suited to his or her objectives and needs. -
Question 9 of 10
9. Question
Which of the following statements is true regarding capital growth?
I. Capital growth describes the appreciation of principal that occurs in securities accounts when the value of the holdings in the accounts increases to help combat loss of purchasing power by inflation
II. While this sounds like an unattractive goal for all investors, the risks associated with capital growth may not be untenable for some investors
III. Strategies for obtaining capital growth are inherently riskier than fixed-income assets, and most do not provide income
IV. Capital growth strategies also help young investors combat the loss of purchasing power due to inflation over long periods of timeCorrect
Capital growth
Capital growth describes the appreciation of principal that occurs in securities accounts when the value of the holdings in the accounts increases to help combat loss of purchasing power by inflation. While this sounds like an attractive goal for all investors, the risks associated with capital growth may be untenable for some investors. Strategies for obtaining capital growth are inherently riskier than fixed-income assets, and most do not provide income. This makes many securities that provide capital growth unsuitable for investors seeking capital preservation and current income. Capital growth strategies also help young investors combat the loss of purchasing power due to inflation over long periods of time.Incorrect
Capital growth
Capital growth describes the appreciation of principal that occurs in securities accounts when the value of the holdings in the accounts increases to help combat loss of purchasing power by inflation. While this sounds like an attractive goal for all investors, the risks associated with capital growth may be untenable for some investors. Strategies for obtaining capital growth are inherently riskier than fixed-income assets, and most do not provide income. This makes many securities that provide capital growth unsuitable for investors seeking capital preservation and current income. Capital growth strategies also help young investors combat the loss of purchasing power due to inflation over long periods of time. -
Question 10 of 10
10. Question
Which of the following statements is true regarding investors in retirement?
I. Clients who have reached the retirement stage can’t rely on their investments to provide them with income for the rest of their lives
II. They also may be considering their mortality and want to provide for their family for that eventuality
III. Clients’ investments should reflect their need for current income
IV. The most suitable investments for investors seeking current income are fixed-income securitiesCorrect
Investors in retirement
Clients who have reached the retirement stage rely on their investments to provide them with income for the rest of their lives. They also may be considering their mortality and want to provide for their family for that eventuality. Clients’ investments should reflect their need for current income. The most suitable investments for investors seeking current income are fixed-income securities such as government debt issues, corporate debt issues, preferred stock, stock of utility companies, and mutual funds that comprise some singularity or combination of the before-mentioned securities.Incorrect
Investors in retirement
Clients who have reached the retirement stage rely on their investments to provide them with income for the rest of their lives. They also may be considering their mortality and want to provide for their family for that eventuality. Clients’ investments should reflect their need for current income. The most suitable investments for investors seeking current income are fixed-income securities such as government debt issues, corporate debt issues, preferred stock, stock of utility companies, and mutual funds that comprise some singularity or combination of the before-mentioned securities.